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Empty Homes Tax: Are You prepared?

January 15, 2018

If you are a City of Vancouver residential property owner, you should have recently received notification that you have to make a 2017 Property Status Declaration.  The City of Vancouver has extended the deadline to March 5, 2018.

The purpose of this declaration is to determine if you are subject to Vancouver’s new Vacancy Tax also known as the Empty Homes Tax (“EHT”).  The EHT is new and the rules are proving to be somewhat confusing for homeowners.

What happens if you don’t submit the 2017 Property Status Declaration?

If you don’t submit by the deadline of March 5, 2018, your property will be deemed to be vacant even if there is a legitimate claim available to exempt you from the EHT.  Since it is deemed vacant your property will be automatically subject to tax of 1% of the property’s 2017 assessed value.  For example, a property assessed at $1 million will have to pay EHT of $10,000.  In addition, failure to file will trigger a late filing penalty of $250.  For this and other reasons we recommend that homeowners submit their declaration by February 2, 2018.

The Good News

The good news is that there are several potential exemptions from the EHT.  The two most widely known are:

  • The Principal Residence Exemption – the home was used as a “principal residence” by the owner, his or her family member or a friend; or
  • The Rental Exemption – the home was rented for at least six months during 2017.

There are some lesser-known exemptions that may be available depending on your circumstances.  For example, if you were travelling or living elsewhere for more than 180 days during 2017 but the property was still your “principal residence” the EHT may not apply.  It is also possible, in certain circumstances, for spouses (whether married or common law) to have different principal residences for purposes of the EHT.

The Bad News

The bad news is that several exemptions from the EHT that homeowners may believe should exist are not available under the current rules.  For example, vacant or undeveloped land may be subject to the EHT even if there is no home on the property that is capable of being occupied or rented.  In addition, homes that were listed for sale in 2017 that were unoccupied may also be subject to EHT if the sale did not complete during 2017.  Perhaps most surprising is that if a property was listed for rent but a suitable tenant could not be located then the property may still be subject to EHT.

Planning

Unfortunately, the planning window to mitigate the EHT is closed for 2017.  Nevertheless, the current rules are vague in many respects and open to interpretation.  Therefore, if you are liable for this tax a careful review of the available exemptions along with your personal circumstances may prove helpful.  In addition, the planning window for 2018 is now open which can help prevent the EHT from turning into an annual charge on your property.

DMCL Is Here To Help

At DMCL, we are ready and able to help with a review of the available exemptions along with your personal circumstances for 2017 to ensure that you don’t overpay EHT.  If you are subject to the EHT in 2017 we are also available to assist you with evaluating various planning opportunities to mitigate any EHT exposure for 2018.  If you have any questions about the EHT, or any other tax questions, contact your trusted DMCL advisor.